section 162 TCGA 1992

[sunny]

I am advised to incorporate my let property portfolio due to high profits being generated. Will I be at a high risk of CGT or can section 162 TCGA 1992 relief apply? I was told that the Inland Revenue do not recognise letting, although it is a business which involves considerable activity , as being anything more than an investment operation, therefore a serious risk of CGT liability upon incorporartion. Please advise.
forgot to mention that I am UK non domiciled if that makes a difference.

[Nigel Lord]

sunny

The hold-over relief available under Section 162 is mandatory (unless the taxpayer elects to waive the relief). It applies where ALL of the assets of 'a business' (except cash) are transferred to a company.

It is generally understood that the meaning of 'a business' is wider than a trade. The Inland Revenue Manuals state:

"Section 162 (1) uses the word ‘business’ not ‘trade’. There is no definition of ‘business’ and so the word must have its normal meaning. It is a term which includes a ‘trade’ but also goes wider. We cannot argue that ‘business’ and ‘trade’ are synonymous.
Transfer: business to companies: meaning of ‘business’.

"It is a question of fact whether a particular activity does constitute a business. It is not easy to draw the line, but we would resist claims that the passive holding of investments or an investment property amounted to a business."

From the limited information you have supplied, it would appear that there is a possibility of Section 162 relief being available. You will appreciate that this is a complex technical area and professional advice should be sought before you proceed.

If you require any further assistance please do not hesitate to contact us, and we will be happy to act on your behalf.

Nigel Lord
Lord Associates
Taxation & Business Consultants
102 Smarts Lane
Loughton
Essex, IG10 4BS
020 8508 1642 & 07769 931852
lordassociates@ntlworld.com

[Huw Williams]

Even if section 162 relief is available, there is a significant problem with it that the business has to be transferred for shares, so that you would (I hope) end up with a substantial share capital.

Depending on what you want to do with the company in the future, this could cause a problem.

Depending on the size of your property portfolio, you may be able to incorporate in stages and avoid realising gains in excess of your exemptions and reliefs.

Huw Williams
enquiries@huwwilliams.co.uk

[Huw Williams]

PS contact me if you want more info

Huw Williams
enquiries@huwwillams.co.uk